Education in India: Past, Present and the Future. Ideas, Policies and Initiatives

July 22, 2010

The state of Indian Philanthropy

Arpan Sheth of Bain & Co. provided an overview of philanthropy in India at a talk delivered to the Indian Philanthropy Forum in March 2010. I have been thinking about the extent of philanthropy in higher education in India and the figures provided by Arpan Sheth are interesting in that context. Here are some extracts from his talk (pdf).

In 2006, India's giving totaled close to $5 billion. That would translate into $7.5 billion in 2009 based on gross domestic product (GDP) figures if the rate of giving remained steady. According to Bain analysis, philanthropic donations would amount to 0.6 percent of Indias GDP. In Brazil, the rate of giving is 0.3 percent and in China, just one-tenth of 1 percent, so we are faring well when compared with other emerging nations.
Now lets look at how we compare to the United States, the worlds leader in giving. Annually, Americans make donations totaling slightly more than $300 billion or about 2 percent of the US gross domestic product.
....
The philanthropy chain is made up of three major stakeholders.

Donors include individuals, corporations and governments both central and state that donate money either directly to charities or to support charitable organizations like the Red Cross. Generally, most donors prefer to reach out directly to grassroots NGOs.

Supporting networks are global operations such as the Red Cross and United Way Worldwide as well as dedicated funds like the Prime Ministers National Relief Fund, which raise and distribute money to charities. These support networks are not very prevalent in India and most are not on a large scale. This is why so many donors give directly to grassroots-based nonprofits.

The final group charity organizations or grassroots nonprofits disburse donations as part of their charitable activities. In India, we have many examples of local organizations such as Care Today and Dastkar.

...

Individual and corporate donations make up only 10 percent of charitable giving in India. The balance of the philanthropy comes from foreign organizations and the government. In fact, nearly 65 percent is donated by Indias central and state governments with a focus on disaster relief.
By comparison, nearly three fourths of all philanthropy in the US is undertaken by individuals. This tradition reflects Americas history and culture of individualism as well as a supportive tax structure. Even more impressive this high rate of charitable giving by individuals has been remarkably consistent for a number of years.
...
When we look at giving as a percentage of household income (in India), donations by the wealthy actually go down. In fact, the wealthiest, or upper class, have the lowest level of giving at 1.6 percent of household income. The high class, which is ranked one level below the upper class on the income and education scale, donates 2.1 percent to charity. Even the middle class gives 1.9 percent of household income to philanthropy. Clearly, there is room for those with means to give more. So why aren't they? Why aren't we?
To understand the challenge before us, we need to look at the three major factors that constrain giving in India.

The first factor: We believe that the relatively recent accumulation of wealth by individuals inhibits philanthropy. The number of wealthy individuals in India started growing rapidly only after the economic reforms of the 1990s. Normally, it takes 50 to 100 years for philanthropic markets to mature. Today in India, many of those with hard-earned new wealth are not eager to part with even a small amount of their money. As a society, charitable donations do not necessarily win social recognition. Instead, many of the newly wealthy view increased material wealth as the key to improving their social standing. A Bain analysis of 30 high-net-worth individuals in India showed that they contribute, on average, just around one-fourth of 1 percent of their net worth to social and charitable causes. But remember, even the great philanthropists John D. Rockefeller, Andrew Carnegie and J.P. Morgan did not give away their riches until toward the end of their lives.

Another factor impeding contributions is a belief by donors that support networks are not professionally managed, and as a result, their contributions wont be put to good use or are at risk of being misappropriated.

Finally, for some, the lines may be blurred between personal giving and corporate social responsibility initiatives. Much of corporate India is run by family-owned groups. Among the top 40 business groups, nearly 70 percent are family-owned or -controlled enterprises. It is likely that some families and individuals view corporate responsibility initiatives as extensions of their own giving. And that may curb their interest in making personal donations.

Now, people ask why India in corporation not doing enough,. I have a clear proposition for that; one, new found wealth, people are still not very comfortable under their skin that this is here to stay. When you come from poverty struck background, you tend to eat more. Similarly when you have come from difficult situation, you do not have the comfort of parting with your wealth.
As you get more comfortable, you will start seeing more and more companies joining this bandwagon. The other part that holds Indians back from doing what many in the Western world do is leaving all the money for the children. So people here will cut down a meal for themselves, but ensure that their children are taken care of. Most wealth is left for the next generation.

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The state of Indian Philanthropy

Arpan Sheth of Bain & Co. provided an overview of philanthropy in India at a talk delivered to the Indian Philanthropy Forum in March 2010. I have been thinking about the extent of philanthropy in higher education in India and the figures provided by Arpan Sheth are interesting in that context. Here are some extracts from his talk (pdf).

In 2006, India's giving totaled close to $5 billion. That would translate into $7.5 billion in 2009 based on gross domestic product (GDP) figures if the rate of giving remained steady. According to Bain analysis, philanthropic donations would amount to 0.6 percent of Indias GDP. In Brazil, the rate of giving is 0.3 percent and in China, just one-tenth of 1 percent, so we are faring well when compared with other emerging nations.
Now lets look at how we compare to the United States, the worlds leader in giving. Annually, Americans make donations totaling slightly more than $300 billion or about 2 percent of the US gross domestic product.
....
The philanthropy chain is made up of three major stakeholders.

Donors include individuals, corporations and governments both central and state that donate money either directly to charities or to support charitable organizations like the Red Cross. Generally, most donors prefer to reach out directly to grassroots NGOs.

Supporting networks are global operations such as the Red Cross and United Way Worldwide as well as dedicated funds like the Prime Ministers National Relief Fund, which raise and distribute money to charities. These support networks are not very prevalent in India and most are not on a large scale. This is why so many donors give directly to grassroots-based nonprofits.

The final group charity organizations or grassroots nonprofits disburse donations as part of their charitable activities. In India, we have many examples of local organizations such as Care Today and Dastkar.

...

Individual and corporate donations make up only 10 percent of charitable giving in India. The balance of the philanthropy comes from foreign organizations and the government. In fact, nearly 65 percent is donated by Indias central and state governments with a focus on disaster relief.
By comparison, nearly three fourths of all philanthropy in the US is undertaken by individuals. This tradition reflects Americas history and culture of individualism as well as a supportive tax structure. Even more impressive this high rate of charitable giving by individuals has been remarkably consistent for a number of years.
...
When we look at giving as a percentage of household income (in India), donations by the wealthy actually go down. In fact, the wealthiest, or upper class, have the lowest level of giving at 1.6 percent of household income. The high class, which is ranked one level below the upper class on the income and education scale, donates 2.1 percent to charity. Even the middle class gives 1.9 percent of household income to philanthropy. Clearly, there is room for those with means to give more. So why aren't they? Why aren't we?
To understand the challenge before us, we need to look at the three major factors that constrain giving in India.

The first factor: We believe that the relatively recent accumulation of wealth by individuals inhibits philanthropy. The number of wealthy individuals in India started growing rapidly only after the economic reforms of the 1990s. Normally, it takes 50 to 100 years for philanthropic markets to mature. Today in India, many of those with hard-earned new wealth are not eager to part with even a small amount of their money. As a society, charitable donations do not necessarily win social recognition. Instead, many of the newly wealthy view increased material wealth as the key to improving their social standing. A Bain analysis of 30 high-net-worth individuals in India showed that they contribute, on average, just around one-fourth of 1 percent of their net worth to social and charitable causes. But remember, even the great philanthropists John D. Rockefeller, Andrew Carnegie and J.P. Morgan did not give away their riches until toward the end of their lives.

Another factor impeding contributions is a belief by donors that support networks are not professionally managed, and as a result, their contributions wont be put to good use or are at risk of being misappropriated.

Finally, for some, the lines may be blurred between personal giving and corporate social responsibility initiatives. Much of corporate India is run by family-owned groups. Among the top 40 business groups, nearly 70 percent are family-owned or -controlled enterprises. It is likely that some families and individuals view corporate responsibility initiatives as extensions of their own giving. And that may curb their interest in making personal donations.

Now, people ask why India in corporation not doing enough,. I have a clear proposition for that; one, new found wealth, people are still not very comfortable under their skin that this is here to stay. When you come from poverty struck background, you tend to eat more. Similarly when you have come from difficult situation, you do not have the comfort of parting with your wealth.
As you get more comfortable, you will start seeing more and more companies joining this bandwagon. The other part that holds Indians back from doing what many in the Western world do is leaving all the money for the children. So people here will cut down a meal for themselves, but ensure that their children are taken care of. Most wealth is left for the next generation.